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Watsco Reports Fourth Quarter Results
4th Quarter Adjusted EPS 25 Cents Per Share;
Sales Trends Improve, Margins Expand, Sharp Growth in Sales of High-Efficiency A/C Systems;
2009 Annual Revenues Eclipse $2 Billion Mark
COCONUT GROVE, Florida (BUSINESS WIRE) February 17, 2010 Watsco, Inc. (NYSE:WSO) today reported its results for the fourth quarter and for the year ended December 31, 2009. The results include Carrier Enterprise, a joint venture formed on July 1, 2009 with Carrier Corporation, which added 95 locations to the Watsco network. Watsco owns 60% of Carrier Enterprise and Carrier owns 40%.
Watsco is the largest distributor of air conditioning, heating and refrigeration equipment and related parts and supplies in the HVAC/R industry, currently operating 505 locations serving over 50,000 customers in 36 states, Puerto Rico, Latin America and the Caribbean. Watscos pro-forma revenues for 2009 were approximately $2.6 billion.
Fourth Quarter Results
Revenues increased 68% to $564 million and include $251 million of sales added by Carrier Enterprise. Same-store sales declined 7%, reflecting 1% growth in sales of air conditioning and heating (HVAC) equipment (49% of sales), a 13% decrease in other HVAC products (41% of sales) and a 15% decrease in the sale of refrigeration products (10% of sales). Sales of HVAC equipment benefited from an improved sales mix of higher-efficiency air conditioning and heating systems, which grew 82% during the period.
Gross profit increased 55% to a record $134 million and gross profit margin was 23.7% versus 25.8%, reflecting the impact of lower selling margins for Carrier Enterprise. Same-store gross profit was $79 million, a decrease of 8%, and gross profit margin was 25.6% versus 25.8% last year, reflecting a shift in sales mix toward HVAC equipment, which traditionally generates lower gross profit margin versus non-equipment products.
Selling, general and administrative (SG&A) expenses increased 47% to $119 million and as a percentage of sales were 21.1% versus 24.0% a year ago. The quarters results reflect numerous profit enhancement initiatives to lower operating costs and improve efficiency. As a result of these efforts, same-store SG&A expenses (excluding transaction costs) declined $11 million, or 14%, to $69 million.
Operating income (excluding transaction costs) increased 175% to $15.8 million with an operating margin of 2.8%. Same-store operating income increased 64% to $9.9 million with an operating margin of 3.2%. On a GAAP basis, operating income increased by 159% to $14.9 million with an operating margin of 2.6%. Net income was $7.5 million on an adjusted basis and $7.1 million on a GAAP basis versus $3.3 million in 2008. Diluted earnings per share were 25 cents on an adjusted basis (21 cents per share on a GAAP basis versus 10 cents per diluted share last year). The results of Carrier Enterprise added approximately 2 cents to diluted earnings per share during the quarter.
Albert H. Nahmad, Watscos President & Chief Executive Officer, stated: Watsco delivered strong earnings growth and higher margins during the fourth quarter, primarily as a result of improved sales trends and our continued vigilance toward reducing operating costs and improving efficiency. Over the last three years, we have reduced SG&A expenses by over $75 million and we continue to strive to identify and execute additional measures to improve efficiency. We are also encouraged with the results of Carrier Enterprise, which generated sales growth, higher operating profit and expanded operating margins. This transformational transaction provides immense opportunities to grow our business and we are excited that the Carrier Enterprise team has responded with improved performance.
The following information was filed by Watsco Inc (WSO) on Wednesday, February 17, 2010 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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